Institute on Taxation and Economic Policy

Policy Briefs

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Impacts of the Tax Relief for American Families and Workers Act

February 2, 2024 • By Joe Hughes, Steve Wamhoff

Impacts of the Tax Relief for American Families and Workers Act

The Tax Relief for American Families and Workers Act passed by the House of Representatives on January 31 is a compromise between lawmakers who want to address child poverty and lawmakers who want to expand the Trump tax cuts for corporations and therefore includes provisions that do both. It also offsets the costs of those […]

Proposed Tax Deal Would Help Millions of Kids with Child Tax Credit Expansion While Extending Damaging Corporate Tax Breaks

On January 16, Congressional tax writers officially announced the details of a tax policy agreement. The deal includes expansions of the Child Tax Credit (CTC) to improve access for low- and middle-income families as well as expansions of the 2017 Trump tax cuts for businesses. The agreement also includes bipartisan tax priorities tax provisions for […]

Far From Radical: State Corporate Income Taxes Already Often Look Beyond the Water’s Edge

State lawmakers are increasingly interested in reforming their corporate tax bases to start from a comprehensive measure of worldwide profit. This provides a more accurate, and less gameable, starting point for calculating profits subject to state corporate tax. Mandating this kind of filing system, known as worldwide combined reporting (WWCR), would be transformative, as it would all but eliminate state corporate tax avoidance done through the artificial shifting of profits into low-tax countries.

America Used to Have a Wealth Tax: The Forgotten History of the General Property Tax

Over time, broad wealth taxes were whittled away to become the narrower property taxes we have today. These selective wealth taxes apply to the kinds of wealth that make up a large share of middle-class families’ net worth (like homes and cars), but usually exempt most of the net worth of the wealthy (like business equity, bonds, and pooled investment funds).The rationale for this pared-back approach to wealth taxation has grown weaker in recent decades as inequality has worsened, the share of wealth held outside of real estate has increased, and the tools needed to administer a broad wealth tax…

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States are Boosting Economic Security with Child Tax Credits in 2023

September 12, 2023 • By Aidan Davis, Neva Butkus

States are Boosting Economic Security with Child Tax Credits in 2023

Fourteen states now provide Child Tax Credits to reduce poverty, boost economic security, and invest in children. This year alone, lawmakers in three states created new Child Tax Credits while lawmakers in seven states expanded existing credits. To maximize impact, lawmakers should consider making their credits fully refundable, not including an earnings requirement, setting a maximum amount per child instead of per household, setting state-specific phase-out ranges that target low- and middle-income families, indexing to inflation, and offering the option of advanced payments.

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Boosting Incomes, Improving Equity: State Earned Income Tax Credits in 2023

September 12, 2023 • By Aidan Davis, Neva Butkus

Boosting Incomes, Improving Equity: State Earned Income Tax Credits in 2023

Nearly two-thirds of states (31 plus the District of Columbia and Puerto Rico) have an Earned Income Tax Credit, an effective tool that boosts low-paid workers’ incomes and helps lower-income families achieve greater economic security. This year, 12 states expanded and improved EITCs.

Weakening the SALT Cap Would Make House Tax Package More Expensive and More Tilted in Favor of the Wealthiest

The three tax bills that cleared the House Ways and Means Committee in June are reportedly stalled due to some House Republicans’ demands that the package include provisions weakening the $10,000 cap on deductions for state and local taxes (SALT). Modifying the House tax package in this way would make it much more expensive while benefiting the richest fifth of taxpayers almost exclusively.

Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform

Nineteen states have sales tax holidays on the books in 2023, and these suspensions will cost nearly $1.6 billion in lost revenue this year. Sales tax holidays are poorly targeted and too temporary to meaningfully change the regressive nature of a state’s tax system. Overall, the benefits of sales tax holidays are minimal while their downsides are significant.

Expanding the Child Tax Credit Would Help Nearly 60 Million Kids, Especially Those in Families with Low Incomes

Restoring the federal Child Tax Credit to 2021 levels would benefit nearly 60 million children. Three-quarters of the benefit would go to families in the bottom three quintiles, consisting of households with less than $86,600 in income.

Trio of GOP Tax Bills Would Expand Corporate Tax Breaks While Doing Little for Americans Who Most Need Help

The trio of tax bills that cleared the House Ways and Means Committee in June include tax cuts that would mostly benefit the richest one percent of Americans and foreign investors.

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How Local Governments Raise Revenue—and What it Means for Tax Equity

March 30, 2023 • By Andrew Boardman, Kamolika Das

How Local Governments Raise Revenue—and What it Means for Tax Equity

Most local tax systems are falling short of their potential. Well-structured local tax policies support communities by facilitating important investments and advancing fairness, but the tax revenue sources most utilized by local governments tend to disproportionately weigh on households with fewer resources. Learning from these realities can inform the path to improved tax policies and stronger communities.

Tax Avoidance Continues to Fuel School Privatization Efforts

Wealthy families are overwhelmingly the ones using school voucher tax credits to opt out of paying for public education and other public services and to redirect their tax dollars to private and religious institutions instead. Most of these credits are being claimed by families with incomes over $200,000.

Higher Stock Buyback Tax Would Raise Billions by Tightening Loophole for the Wealthy

A higher excise tax rate on buybacks is completely reasonable. Quadrupling the rate, as the President proposes, would raise more revenue and cut into the tax advantage buybacks have over dividends. When a company uses their cash holdings to repurchase their own stock, it is an admission that they have few productive investment opportunities. The public does have productive uses for the tax revenue like infrastructure and schools that create value for the entire economy.

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The Pitfalls of Flat Income Taxes

January 17, 2023 • By Carl Davis, Eli Byerly-Duke

The Pitfalls of Flat Income Taxes

Flat taxes have some surface appeal but come with significant disadvantages. Critically, a flat tax guarantees that wealthy families’ total state and local tax bill will be a lower share of their income than that paid by families of more modest means.

Twenty-Three Corporations Saved $50 Billion So Far Under Trump Tax Law’s “Bonus Depreciation” that Many Lawmakers Want to Extend

Nearly two dozen of America’s largest corporations together received roughly $50 billion in tax breaks from 2018 through 2021 under a Trump tax law provision that many lawmakers now want to extend. Corporate lobbyists are even asking Congress to extend this “accelerated depreciation” tax break as part of a possible year-end tax bill.

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How the Inflation Reduction Act’s Tax Reforms Can Help Close the Racial Wealth Gap

September 20, 2022 • By Brakeyshia Samms, Joe Hughes

How the Inflation Reduction Act’s Tax Reforms Can Help Close the Racial Wealth Gap

Lawmakers have many opportunities to pass reforms that will make our tax code fairer and further reduce racial inequity in our economy. The Inflation Reduction Act is a great step forward; better taxing wealth and income from wealth and expanding targeted refundable tax credits would build on this progress.

Boosting Incomes and Improving Tax Equity with State Earned Income Tax Credits in 2022

States continued their recent trend of advancing EITCs in 2022, with nine states plus the District of Columbia either creating or improving their credits. Utah enacted a 15 percent nonrefundable EITC, while the District of Columbia, Hawaii, Illinois, Maine, Vermont and Virginia expanded existing credits. Meanwhile, Connecticut, New York and Oregon provided one-time boosts to their EITC-eligible populations.

More States are Boosting Economic Security with Child Tax Credits in 2022

After years of being limited in reach, there is increasing momentum at the state level to adopt and expand Child Tax Credits. Today ten states are lifting the household incomes of families with children through yearly multi-million-dollar investments in the form of targeted, and usually refundable, CTCs.

Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform

Lawmakers in many states have enacted “sales tax holidays” (20 states will hold them in 2022) to temporarily suspend the tax on purchases of clothing, school supplies, and other items. These holidays may seem to lessen the regressive impacts of the sales tax, but their benefits are minimal while their downsides are significant—particularly as lawmakers have sought to apply the concept as a substitute for more meaningful, permanent reform or arbitrarily reward people with specific hobbies or in certain professions. This policy brief looks at sales tax holidays as a tax reduction device.

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Resources on the Build Back Better Agenda

December 12, 2021 • By ITEP Staff

Resources on the Build Back Better Agenda

President Biden’s American Families Plan (AFP) would use personal income tax increases on very well-off individuals to finance investments in people—in childcare, education, higher education, reducing child poverty, and other related measures. The following analyses provide more information about the revenue proposals in the AFP.

Boosting Incomes and Improving Tax Equity with State Earned Income Tax Credits in 2021

The EITC benefits low-income people of all races and ethnicities. But it is particularly impactful in historically excluded Black and Hispanic communities where discrimination in the labor market, inequitable educational systems, and countless other inequities have relegated a disproportionate share of people to low-wage jobs.

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Investment Income and Racial Inequality

October 14, 2021 • By Emma Sifre, ITEP Staff, Joe Hughes

Investment Income and Racial Inequality

Congress has a historic opportunity to fix the way the preferential treatment of investment income widens the racial wealth gap and to strive toward a racially equitable tax code.

The One Thing Missing From the Qualified Business Income Deduction Conversation: Racial Equity

When crafting tax policy, lawmakers and bill authors often work backward, using a patchwork of changes to help achieve their stated goal. One important consideration that is routinely left out is what impact the change will have on racial equity. Such is the case with the qualified business income deduction, which is helping to further enrich wealthy business owners, the overwhelming majority of whom are white. At present, white Americans own 88 percent of private business wealth despite making up only 60 percent of the population. Meanwhile, Black and Hispanic families confronting much higher barriers to entrepreneurship each own less…

Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform

Policymakers tout sales tax holidays as a way for families to save money while shopping for “essential” goods. On the surface, this sounds good. However, a two- to three-day sales tax holiday for selected items does nothing to reduce taxes for low- and moderate-income taxpayers during the other 362 days of the year. Sales taxes are inherently regressive. In the long run, sales tax holidays leave a regressive tax system unchanged, and the benefits of these holidays for working families are minimal. Sales tax holidays also fall short because they are poorly targeted, cost revenue, can easily be exploited, and…

ITIN Filer Data Gap: How Changing Laws, Lack of Data Disaggregation Limit Inclusive Tax Policy

Like U.S. citizens, noncitizens who live, work, or invest in the United States must file local, state and federal taxes. But in order to file personal income taxes, they must first be issued a processing number called an Individual Taxpayer Identification Number (ITIN) by the IRS. These numbers are issued to both legal permanent residents and nonresidents who are not eligible for Social Security numbers. ITINs do not imply immigration status, nor can they be used for immigration enforcement purposes, but they can be used to create burdensome barriers that make it difficult for ITIN holders to file taxes and…